U.P. State Spinning Co. Ltd. vs T.T. Limited And Anr.
2006 Latest Caselaw 436 Del

JUDGMENT

Sanjiv Khanna, J.

1. M/s U.P. State Spinning Company Limited (hereinafter referred to as the petitioner) has filed the present revision petition for setting aside order dated 22nd February, 2005 passed by the learned Civil Judge dismissing its application under Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as the Act, for short). The petitioner claims that it is a sick company under the provisions of the aforesaid Act and, therefore, suit for recovery of Rs. 1,76,875/- filed by the M/s T.T. Limited, the respondent No. 1 herein, is liable to be dismissed.

2. M/s U.P. State Textile Corporation Limited, the respondent No. 2 herein, as per the averments made in the plaint by fax dated 22nd August, 1995 placed an order for supply of goods upon the respondent No. 1. As agreed, the respondent No. 1 deposited a sum of Rs. 1,00,000/- as a refundable security deposit against the said order. The respondent No. 1 was/is entitled to interest @ 15% per annum on the said deposit. The respondent No. 1 claims that goods were supplied and the petitioner herein a subsidiary of respondent No. 2 issued form No. H and no dues certificate for refund of the security deposit with interest. However, in spite of correspondence and furnishing of documents, the security deposit of Rs. 1,00,000/- was not refunded and, therefore, the respondent No. 1 filed a suit for recovery against both the petitioner and the respondent No. 2.

3. As per the averments made in the revision petition, the petitioner had filed a reference under Section 15 of the Act and was declared sick in the year 1992 and thereafter on 9th December, 1996 a scheme was sanctioned under the provisions of the said Act.

4. Learned Trial Court by the impugned order rejected the application of the petitioner under Section 22 of the Act, inter alia, holding that the amount due and claimed by the respondent No. 1 was not reckoned and included in the sanctioned scheme for rehabilitation. In this regard learned Trial Court relied upon judgment of the Supreme Court in the case of Deputy Commercial Tax Officer and Ors. v. Corromandal Pharmaceuticals and Ors. .

5. Learned Counsel appearing for the petitioner has not been able to controvert and deny that the amount claimed by the respondent No. 1 in the suit is not subject matter and included in the scheme that has been sanctioned. In the case of Deputy Commercial Tax Officer (supra), the Supreme Court examined Section 22 of the Act including its earlier judgments in the case of The Gram Panchayat and Anr. v. Shree Vallabh Glass Works Limited and Ors. and Maharashtra Tubes Limited v. State Industrial and Investment Corporation of Maharashtra Limited and Anr. and it has been held that the embargo envisaged by the said Section can apply to dues included or reckoned in the sanctioned scheme. It was held that it would be unfair, unreasonable and also against the spirit of the statute to apply embargo or bar of Section 22 of the Act for dues that are not reckoned or included in the sanctioned scheme and, therefore, should be avoided. The purpose and object behind the said Act is to provide preventive or remedial measures to enable a company to rehabilitate but in totality the safeguard and protection of Section 22 of the Act is only against impediments in implementation of the scheme itself. Accordingly, the decisions given in the case of Gram Panchayat and Maharashtra Tubes were distinguished. This distinction was also noticed by the Supreme Court in the case of Tata Davy Limited v. State of Orissa and Ors. and the distinguishing feature was that the liability in Corramandal's case had arisen after the date of the sanctioned scheme. Order passed by the learned trial court is, therefore, justified.

6. There is another reason why I feel the present revision petition is liable to be dismissed. The respondent No. 2 is the party with whom the respondent No. 1 had entered into the contract to supply goods and it is the case of the petitioner that the respondent No. 1 had made the security deposit of Rs. 1,00,000/- with the respondent No. 2 and, therefore, it was/is not liable to pay this amount. The petitioner also relies upon an order passed by the BIFR pursuant to which the petitioner has become an independent company and is no longer a subsidiary of respondent No. 2. It is the case of the petitioner that only respondent No. 2 is liable to refund the security deposit with interest. In the case of Cement Corporation of India Limited and Ors. v. M.P. Joseph , a single Judge of this Court has held that where a sick company denies his liability to make payment, the plaintiff can have its claim adjudicated upon and Section 22 of the Act is not applicable.

7. In view of the above, I do not find any merit in the present revision petition and the same is dismissed. However, in the facts and circumstances of the case, there will be no order as to costs.